Casino Connection Atlantic City

Creative Ways to Buy a Home

Strategies for making your dreams come true

by Rick Anderson

Most folks think there’s just one way for the average homeowner to buy a second property (whether it be investment property or second home), and that is to go to the bank or the mortgage company and buy a mortgage from an institutional lender. But if you're not locked into thinking that way, then you’re already ahead of the game. There are many possibilities open to the average homeowner.

Did you know you can often borrow money from your real-estate agent/broker? It depends on the agent and the company. They’re eager for your business, aren’t they? Well, find out how eager, before you start the deal. Certain agents will allow this. But the trick is, you have to ask. Here’s another way to buy property: Most people already know that you can use the equity in your current home as collateral against a loan for a second home. This isn’t risky if you know what you’re doing. Furthermore, because of the slowness in housing purchases in southern New Jersey, there are local mortgage companies (I have a short list of them) which have “re-tooled” themselves to coach you, the consumer, step-by-step, on how to do this very thing.

Why? Because it’s a buyer’s market right now, so mortgage companies are more than eager for your business.

More about borrowing from the agent: Real-estate commissions are about 6 percent of the property’s purchase price. Independent agents can list and sell the same property. In that case they get the whole commission. If there’s a listing and a selling agent, the commission’s usually split between them. When dealing with independent agents, since they get the most commission, it’s sometimes possible for the buyer to “borrow” some of their commission fee, or even to write the agent a promissory note for an amount larger than his or her commission, to provide some motivation.

Let’s say the agent’s commission is $14,000. Instead of cash, offer a $14,000 note with a great interest rate. Or offer more of a note at a lower rate, due in say, seven years. It’s a great way to generate your new home’s down payment if you need to hold onto as much cash as you can. Then later, before the note comes due, offer to “cash out” the agent from the note deal for an early discount. Legal promissory notes don’t require a special license to write up. The homeowner can do it, just as the agent can.

These are a couple of ways of doing “creative” financing. But there are plenty more. And if you have one or two that I haven’t thought of, give me a ring. If I like the idea, I’ll post it!